Demand tariffs sound like something relating to international trade and certain shouty presidents. But when it comes to electricity, taking full advantage of a demand tariff might help you hack your way to a lower power bill.
What is a demand tariff?
A demand tariff is a type of electricity rate where you pay an extra ‘demand’ charge during a peak half-hour period. Though there’s a few slightly different forms, the most common demand tariff is based on your highest usage spike during a billing period. It’s designed to discourage customers from putting pressure on the electricity grid by using loads of electricity all at once – especially during peak times.
Generally, peak times are when everyone is using electricity – think around dinnertime when everyone is cooking, running dishwashers and heating, and streaming the latest season of Stranger Things.
The more power you use at once (during the demand period), the higher your charge will be. It’s a bit like getting your usual Netflix bill every month, but paying an extra high ‘demand’ charge for the time when you streamed five movies all at once.
Why are demand tariffs being introduced?
Pressure on the electricity grid during peak times is what can lead to outages and grid instability. By encouraging people to spread their use across the day, we can avoid having every dishwasher in Australia trying to run at exactly 7:07pm.
What are the benefits of being on a demand tariff?
Off-peak electricity is usually cheaper on a demand tariff compared to other tariff types. So, if you can minimise electricity usage during your demand periods and instead spread it out over the day, you'll likely end up with a lower bill - and who doesn’t want that?
How is a demand charge calculated?
Demand charges are usually based your highest half-hour of electricity use during demand windows each month (normally this is in the evenings and on weekends). This half-hour sets your demand charge for the month.
For a basic demand tariff structure, your charge comes from multiplying your peak demand by the demand rate and the number of days in the month.
Below is an example of what that might look like:
